[403(b) Fidelity or TIAA Cref allocation, and do I want one?]

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
User avatar
MossySF
Posts: 2141
Joined: Thu Apr 19, 2007 9:51 pm
Contact:

Re: EJ not [costing me as much as] others?

Postby MossySF » Tue Jan 10, 2017 12:34 am

Besides the annual capital gains, the biggest strike against the EJ FA is putting you in 19 different funds. Blend them all together and then look at the combined stock holdings -- how much different will that be from holding 2 or 3 Vanguard index funds (besides the extra fees, taxes and complications)?

If the FA had put you in 5 funds, they could have made the argument that their research is pointing to XYZ segments doing better in the next 10-15 years and they are concentrating in those segments. But 3%-4% in each fund?

TIAX
Posts: 565
Joined: Sat Jan 11, 2014 12:19 pm

Re: EJ not [costing me as much as] others?

Postby TIAX » Tue Jan 10, 2017 12:37 am

ai_3_us wrote:To be honest I have been putting money in there as a means of comparison. For a little bit I thought I would split my total wealth 50-50 between EJ and Vanguard and see what happened after 10 years. (a) I am now feeling like that may be a costly move and (b) I know that past performance is not indicative of future performance (hello Markov processes), but it would be telling if one outperformed the other by a significant margin.

All it would tell you is that a monkey threw darts well for 10 years.

ai_3_us
Posts: 50
Joined: Mon Jan 09, 2017 7:53 pm

Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 12:39 am

TIAX wrote: What's your long term capital gains rate?


I do not know the answer to that question or how to determine it.

TIAX
Posts: 565
Joined: Sat Jan 11, 2014 12:19 pm

Re: EJ not [costing me as much as] others?

Postby TIAX » Tue Jan 10, 2017 12:45 am

ai_3_us wrote:
TIAX wrote: What's your long term capital gains rate?


I do not know the answer to that question or how to determine it.

https://www.bogleheads.org/wiki/Capital ... stribution

HornedToad
Posts: 604
Joined: Wed May 21, 2008 12:36 am

Re: EJ not [costing me as much as] others?

Postby HornedToad » Tue Jan 10, 2017 12:45 am

ai_3_us wrote:
TIAX wrote:
rr2 wrote:
ai_3_us wrote:Unfortunately my income is not enough right now to fully support my Roth, though I would like to.

If you are making at least $5500/year in earned income, then you can max your Roth IRA. As livesoft mentioned, you can withdraw from your EJ account for living expenses.

Your income is less than $5500/year?


No, it is not. I have maxed out my Roth IRA every year I have had it. Is it worthwhile to withdraw from my EJ account for living expenses? I will almost certainly need to do that if I contribute $5500/yr to my Roth.


It's certainly worth it since you are changing from taxable to tax-exempt and after 5 years having a ROTH open you can take out your contribution tax-free if needed and can withdraw earnings for 1st time house purchase.

ai_3_us
Posts: 50
Joined: Mon Jan 09, 2017 7:53 pm

Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 12:48 am

TIAX wrote:
ai_3_us wrote:
TIAX wrote: What's your long term capital gains rate?


I do not know the answer to that question or how to determine it.

https://www.bogleheads.org/wiki/Capital ... stribution


Well in that case, 0%.

livesoft
Posts: 52557
Joined: Thu Mar 01, 2007 8:00 pm

Re: EJ not [costing me as much as] others?

Postby livesoft » Tue Jan 10, 2017 12:49 am

Well then you haven't been killed on taxes on cap gains distributions … yet. :) But you would've noticed on your tax returns that you didn't pay any taxes, so what's up with that?
This signature message sponsored by sscritic: Learn to fish.

TIAX
Posts: 565
Joined: Sat Jan 11, 2014 12:19 pm

Re: EJ not [costing me as much as] others?

Postby TIAX » Tue Jan 10, 2017 12:52 am

ai_3_us wrote:
TIAX wrote:
ai_3_us wrote:
TIAX wrote: What's your long term capital gains rate?


I do not know the answer to that question or how to determine it.

https://www.bogleheads.org/wiki/Capital ... stribution


Well in that case, 0%.

Then you should certainly fund the Roth (and 401(k), HSA, etc.) with your taxable account, if necessary. You should also consider tax gain harvesting.

ai_3_us
Posts: 50
Joined: Mon Jan 09, 2017 7:53 pm

Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 12:54 am

livesoft wrote:Well then you haven't been killed on taxes on cap gains distributions … yet. :) But you would've noticed on your tax returns that you didn't pay any taxes, so what's up with that?

That's a good question. Are they short term capital gains taxes? My only ordinary income is from my job, and it is $26,000/yr which means my tax rate is 15%.

TIAX
Posts: 565
Joined: Sat Jan 11, 2014 12:19 pm

Re: EJ not [costing me as much as] others?

Postby TIAX » Tue Jan 10, 2017 12:55 am

ai_3_us wrote:
livesoft wrote:Well then you haven't been killed on taxes on cap gains distributions … yet. :) But you would've noticed on your tax returns that you didn't pay any taxes, so what's up with that?

That's a good question. Are they short term capital gains taxes? My only ordinary income is from my job, and it is $26,000/yr which means my tax rate is 15%.

Does your employer offer a 401(k)? if so, let us know the funds and expense ratios.

ai_3_us
Posts: 50
Joined: Mon Jan 09, 2017 7:53 pm

Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 12:57 am

TIAX wrote:
ai_3_us wrote:
TIAX wrote:
ai_3_us wrote:
TIAX wrote: What's your long term capital gains rate?


I do not know the answer to that question or how to determine it.

https://www.bogleheads.org/wiki/Capital ... stribution


Well in that case, 0%.

Then you should certainly fund the Roth (and 401(k), HSA, etc.) with your taxable account, if necessary. You should also consider tax gain harvesting.

Interesting. And this is something that can be done if I were to switch to a simpler portfolio full of a few index funds? Also does this mean when I sell my EJ funds I won't take any capital gains tax since most are long term?
Last edited by ai_3_us on Tue Jan 10, 2017 12:59 am, edited 1 time in total.

ai_3_us
Posts: 50
Joined: Mon Jan 09, 2017 7:53 pm

Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 12:58 am

TIAX wrote:
ai_3_us wrote:
livesoft wrote:Well then you haven't been killed on taxes on cap gains distributions … yet. :) But you would've noticed on your tax returns that you didn't pay any taxes, so what's up with that?

That's a good question. Are they short term capital gains taxes? My only ordinary income is from my job, and it is $26,000/yr which means my tax rate is 15%.

Does your employer offer a 401(k)? if so, let us know the funds and expense ratios.

No. I am only offered a 403(b) through Fidelity.

Nate79
Posts: 375
Joined: Thu Aug 11, 2016 6:24 pm
Location: Portland, OR

Re: EJ not [costing me as much as] others?

Postby Nate79 » Tue Jan 10, 2017 12:58 am

ai_3_us wrote:
Nate79 wrote:Can you post the funds your advisor has you in along with the corresponding ER and any loads you paid? Most likely you have a complicated portfolio of high ER funds in which you may have paid a high load fee.


I have edited the OP with this information. I wonder why the high load fee matters now that I have already paid it? I also think the portfolio is more complicated than need be, but the numbers I posted about returns are correct, so my question remains, why is switching better?



The load matters because you are starting with less from the beginning though going forward it is a sunk cost.

It is incorrect to compare your return to an S&P500 index. You could probably build most of your portfolio with index funds to better compare. Maybe some of your funds have beat their index recently, maybe not. But chances are very high that over the long term (30+ years) they will lag and it is impossible to know which funds will beat their index ahead of time. You could back test your portfolio to see if it is a good well diversified portfolio and even compare to the 3 fund. You can mix and match all type of funds that can beat the 3 fund portfolio using historical data but that doesn't mean it will in the future.

The future is unknown. But your portfolio could be greatly simplified and you can save 2% minimum per year by using the 3 fund at Vanguard. Remember that the 2% comes off the entire portfolio which means if the market returns 6%, you got 4% which is 33% difference.

livesoft
Posts: 52557
Joined: Thu Mar 01, 2007 8:00 pm

Re: EJ not [costing me as much as] others?

Postby livesoft » Tue Jan 10, 2017 1:04 am

ai_3_us wrote:
livesoft wrote:Well then you haven't been killed on taxes on cap gains distributions … yet. :) But you would've noticed on your tax returns that you didn't pay any taxes, so what's up with that?

That's a good question. Are they short term capital gains taxes? My only ordinary income is from my job, and it is $26,000/yr which means my tax rate is 15%.

So with $26,000 earned income you still showed another $30,000 or so in investment income, so you may not be in the 0% LTCG tax bracket. But you can reduce your taxable income by
$18,000 to 403(b)
$5,500 to Roth IRA
and improving the tax efficiency of your portfolio.

Yes, you get those dividends and yes you have to pay FICA and medicare, but then sell enough shares to pay your expenses when you don't have those cap gains distributions.

Note how the FA didn't help you with financial advice on reducing taxes. That's because it would cut into their income they get from you. If I was in your situation, I'm pretty sure I could figure ou how to not pay any income taxes. May I ask what were your taxes in 2015 anyways, Form 1040 Line 63?
Last edited by livesoft on Tue Jan 10, 2017 1:12 am, edited 1 time in total.
This signature message sponsored by sscritic: Learn to fish.

User avatar
Dale_G
Posts: 2849
Joined: Tue Feb 20, 2007 5:43 pm
Location: Central Florida - on the grown up side of 79

Re: EJ not [costing me as much as] others?

Postby Dale_G » Tue Jan 10, 2017 1:10 am

Stock markets go up and down from time to time, but investment expenses go on forever - or however long you are willing to put up with them.

Dale
Volatility is my friend

ai_3_us
Posts: 50
Joined: Mon Jan 09, 2017 7:53 pm

Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 1:12 am

livesoft wrote: But you can reduce your taxable income by
$18,000 to 403(b)
$5,500 to Roth IRA

Can 403(b) contributions be made outside of taking directly from my paycheck? From my employer's website it looks as though contributions need to come from my paycheck.

livesoft wrote:
Note how the FA didn't help you with financial advice on reducing taxes. That's because it would cut into their income they get from you.

I know, I was just thinking about that and it is worrisome. How does it cut into their income?
Last edited by ai_3_us on Tue Jan 10, 2017 1:15 am, edited 1 time in total.

livesoft
Posts: 52557
Joined: Thu Mar 01, 2007 8:00 pm

Re: EJ not [costing me as much as] others?

Postby livesoft » Tue Jan 10, 2017 1:14 am

ai_3_us wrote:Can 403(b) contributions be made outside of taking directly from my paycheck? From my employer's website it looks as though contributions need to come from my paycheck.

From paycheck only, so set it up to happen.

If you sell your investments at E-J to pay your living expenses then your amount of money at E-J gets reduced and the AUM fee is smaller. So 1% of $18,000 is $180 less fee, for instance.
This signature message sponsored by sscritic: Learn to fish.

User avatar
BL
Posts: 6286
Joined: Sun Mar 01, 2009 2:28 pm

Re: EJ not [costing me as much as] others?

Postby BL » Tue Jan 10, 2017 1:37 am

Guess I lost what I wrote earlier.

Anyway, have you considered that you will be paying the same relative fees even when the stock market crashes 50%? That is when you may notice the pain: you are losing money and your "advisor" is getting the usual %. You take all the risks but the gain is still there for him; he isn't losing money, just not gaining quite as much.

krow36
Posts: 1033
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: EJ not [costing me as much as] others?

Postby krow36 » Tue Jan 10, 2017 2:04 am

Here's an interesting NY Times article on index vs actively managed funds.
http://www.nytimes.com/2015/04/05/your- ... ticle&_r=0

User avatar
Svensk Anga
Posts: 281
Joined: Sun Dec 23, 2012 5:16 pm

Re: EJ not [costing me as much as] others?

Postby Svensk Anga » Tue Jan 10, 2017 10:22 am

Devil's advocate here. (Yes, some on this forum believe EJ is the devil.)

ai_3_us will likely incur capital gains and pay taxes thereon to move this sizable taxable portfolio out of EJ and into indexes. You ought to figure out what your cost basis in these funds is and how much capital gains exposure you have. You have some room in the 15% tax bracket (0% long term gains bracket) if you can unload these funds before year-end when the capital gains distributions are paid out. The top of the bracket is $48,350 gross income if single and taking the standard deduction. Maximizing the pre-tax 403(b) contributions would help to make more bracket space. Luckily, you are thinking about this at the start of the year when you have the most room to maneuver.

It might be that you should sell now those funds that have a high basis and use up little bracket space. Then roll the cash and the other funds in-kind to Vanguard. Invest the cash. Then sell the remaining funds and move into cost effective investments a little bit year by year as bracket space allows. If there are any losses, sell those to offset taxes on the winners. If we get a market correction, there could be opportunity to unload more. Selling now to incur gains that will be taxed at 15% (or more) may not be in your best interest. It depends somewhat on how long you can keep the 0% capital gains rate and how big the portfolio gains are. At least you could very quickly ditch the AUM fee.

Using the specific identification cost basis method should help to maximize the fund sales per unit of tax bracket space. Last year's capital gains distributions for instance, if reinvested, will show little if any gain.

Turn off dividend re-investment so that you can direct the cash flow as desired, including toward living expenses to make up for the high 403(b) contributions.

Rolling it all in-kind to another broker might incur fees in selling all these funds, though maybe not high on a percentage basis.

You should brace yourself for a lot of push-back from the EJ broker. He could see your withdrawal as the domino that starts the cascade for your other family members' accounts.

Jack FFR1846
Posts: 4293
Joined: Tue Dec 31, 2013 7:05 am

Re: EJ not [costing me as much as] others?

Postby Jack FFR1846 » Tue Jan 10, 2017 10:42 am

I look at fees. You're paying about $5,000 on your (about) $500k portfolio.

By comparison, I'm all in index funds with some iBonds included since they're part of my investments. On a $2MM portfolio, I pay less than $900 a year in fees.

If you believe that the EJ mother ship can conjur up hocus pocus and make you money on par with indexing and you can sleep at night, then stay with them. I have a problem spending money on non-value things so will stick with indexing.

Also, this: http://kronstantinople.blogspot.com/p/e ... -saga.html
Bogle: Smart Beta is stupid

TIAX
Posts: 565
Joined: Sat Jan 11, 2014 12:19 pm

Re: EJ not [costing me as much as] others?

Postby TIAX » Tue Jan 10, 2017 11:11 am

livesoft wrote:
ai_3_us wrote:
livesoft wrote:Well then you haven't been killed on taxes on cap gains distributions … yet. :) But you would've noticed on your tax returns that you didn't pay any taxes, so what's up with that?

That's a good question. Are they short term capital gains taxes? My only ordinary income is from my job, and it is $26,000/yr which means my tax rate is 15%.

So with $26,000 earned income you still showed another $30,000 or so in investment income, so you may not be in the 0% LTCG tax bracket. But you can reduce your taxable income by
$18,000 to 403(b)
$5,500 to Roth IRA
and improving the tax efficiency of your portfolio.

Yes, you get those dividends and yes you have to pay FICA and medicare, but then sell enough shares to pay your expenses when you don't have those cap gains distributions.

Note how the FA didn't help you with financial advice on reducing taxes. That's because it would cut into their income they get from you. If I was in your situation, I'm pretty sure I could figure ou how to not pay any income taxes. May I ask what were your taxes in 2015 anyways, Form 1040 Line 63?

livesoft and others are giving you excellent advice but I'm not sure anyone mentioned what your goals should be. They're as follows:
  1. Maximize your tax-advantaged accounts every year, even if you need to sell taxable funds to do so. As you know, you will need to pay taxes every year on any dividends you receive from your taxable account as well as capital gains (unless in 0% LTCG rate and gains are LT). You may want to think about whether a Roth 403(b) makes sense in a particular year, depending on your tax bracket. Less importantly, 403(b)s and IRAs (in most states), are safe from bankruptcy and judgment creditors. You should post the available funds and expenses in your 403(b).
  2. Get your funds out of EJ as soon as possible but try to do so in a tax-efficient manner. For example, if you have funds that have 50k in losses, you can then sell funds that have 50k in gains without incurring tax liability (it's a bit more complicated since you have to consider short and long term losses). You should also figure out your long term capital gain rate in a given year and note that maximizing the 403(b) will allow you to lower your income by 18k.
  3. Read a book or two on this list (I'd start with the two Bogleheads' Guides.

livesoft
Posts: 52557
Joined: Thu Mar 01, 2007 8:00 pm

Re: EJ not [costing me as much as] others?

Postby livesoft » Tue Jan 10, 2017 11:46 am

Svensk Anga wrote:Devil's advocate here. (Yes, some on this forum believe EJ is the devil.)

ai_3_us will likely incur capital gains and pay taxes thereon to move this sizable taxable portfolio out of EJ and into indexes. You ought to figure out what your cost basis in these funds is and how much capital gains exposure you have.

I agree that OP should know what the unrealized capital gains exposure is for all their taxable account assets AT ALL TIMES including now and in the future. But because the funds are actively-managed and tax-inefficient AND because the OP has already stated the tens of thousands of dollars of capital gains distributions that are paid out every year, I believe the unrealized capital gains to be realized will probably not amount to much. Yes, it is imperative to know all these numbers ahead of time for ANY portfolio with taxable assets whether they are actively managed or whether they are index funds.
This signature message sponsored by sscritic: Learn to fish.

Fox
Posts: 7
Joined: Tue Dec 13, 2016 2:00 pm

Re: EJ not [costing me as much as] others?

Postby Fox » Tue Jan 10, 2017 12:40 pm

We have our Roth IRAs and two 529 accounts at EJ. We were given some money in a custodial Roth from my wife's parents when we got married, so we opened the 2nd Roth and stuck at EJ for the past 5 years. I discovered Bogleheads a few months ago and have been re-evaluating everything and preparing to take charge of my investments. I have more studying to do, but it is inevitable that I will leave EJ (likely within the year).

Our Roths and 529s consist of American Funds, which he charges a 3.5% front load. Average ER is around 0.75. Our combined Roth accounts are about $125,000 and have had decent growth, but I can't imagine what it would be if we hadn't lost 4% right away. Going forward, because of the new account changes at EJ, our advisor will be charging a flat fee of 1.2% (the lowest possible he said he can charge) on the accounts. I'll spare any more gory details, but I proposed numerous changes for our accounts and I'm meeting with him tomorrow to discuss some things. I might be dropping EJ sooner than I expected depending on the meeting results.

If a new investor uses EJ and can avoid loaded funds and have funds offered that have a reasonable expense ratio, then having a lower value account at EJ to get started doesn't sound crazy.

User avatar
CAsage
Posts: 339
Joined: Sun Mar 27, 2016 6:25 pm

Re: EJ not [costing me as much as] others?

Postby CAsage » Tue Jan 10, 2017 1:14 pm

Could I get some clarification? I hear various discussions in this very long and fascinating thread that OP's EJ fees are (variously) 1%, or 2%, or ? Is it true that EJ charges 1% for overall supervision plus the underlying Expense Ratios, so the OP is clearly spending closer $10K per year than $5,000 in total fees. I won't even go into the ghastly drain of reinvesting dividends into load fees - even though the OP paid the load already on his (way too many) funds, is it also not true that reinvesting into those accounts also requires a "load" on his reinvestment? Crawling through the last two years detailed statements might be educational.

Also, it would be very educational for the OP to plug this portfolio into Morningstar's X-ray. With so many funds with such obtuse titles.... it's probably a messy but diversified portfolio. Which, as others have pointed out, means he could have bought the same diversification at a fraction of the cost with a Fidelity or Schwab or Vanguard Total stock.
It sounds to me, as well, that the OP is really only looking at the last few years of returns to compare. There are innumerable studies that show managed funds cannot beat the market over 30 years. See John Bogle's books on mutual fund return analysis and fund survival, or "Random Walk on Wall Street" or other great books. The OP has a very long time ahead of him, and those fees really matter.

User avatar
David Jay
Posts: 2638
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: EJ not [costing me as much as] others?

Postby David Jay » Tue Jan 10, 2017 1:14 pm

ai_3_us wrote:Is it worthwhile to withdraw from my EJ account for living expenses? I will almost certainly need to do that if I contribute $5500/yr to my Roth.


Absolutely! Everything you put in your Roth grows tax free for the next 30 years and all of it comes out tax free after age 59 1/2 (you can take out the contributions tax free after 5 years)
"Prediction is very difficult, especially about the future" Niels Bohr

Novine
Posts: 1145
Joined: Mon Nov 17, 2008 9:07 pm

Re: EJ not [costing me as much as] others?

Postby Novine » Tue Jan 10, 2017 1:41 pm

"If a new investor uses EJ and can avoid loaded funds and have funds offered that have a reasonable expense ratio, then having a lower value account at EJ to get started doesn't sound crazy."

Let's unpack the "ifs":

1. Most/all new investors don't get to avoid loaded funds at EJ. That's one of the ways that EJ makes money off you.

2. It depends on your definition of "reasonable expense ratio" but as you can see from the OPs list of funds, most of those ERs are not reasonable as compared to their comparable funds available from Vanguard and others.

3. Having a lower value account at EJ to get started doesn't sound crazy? Yes, it does. Why would you invest somewhere that starts you in a hole, takes more of your money along the way and can't guarantee that you'll do any better than investing elsewhere for a lot less?

To put it another way, there's absolutely no reason for a new investor to be at EJ. If they need financial advice, which EJ often doesn't provide, there's other ways to get it without all of the financial conflicts.

Wakefield1
Posts: 280
Joined: Mon Nov 14, 2016 10:10 pm

Re: EJ not [costing me as much as] others?

Postby Wakefield1 » Tue Jan 10, 2017 2:18 pm

If the O.P. has been using tax preparers or software to do his tax returns he should get a Form 1040 (and its schedules as applies to his affairs) and instruction booklets) and try to fill them out himself as an exercise in looking at his tax and financial picture even if he intends to use the tax preparers for the actual filing. If the forms are not to be physically used to send to IRS they could just be downloaded and printed. The instruction booklets (like Pub. 590) can be read online.

bloom2708
Posts: 1306
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: EJ not [costing me as much as] others?

Postby bloom2708 » Tue Jan 10, 2017 2:27 pm

Once your eyes are open to the fees you are paying you cannot close them.

You are in the denial phase at this point. That is ok. I was there as well. I escaped less than 2 years at EJ with a good "life lesson".

My parents choose to stay at EJ. They don't want to make their advisor "feel bad". Yet they feel bad knowing they are buying him a new car in fees each year and skimming $250k or more off their portfolio value over the next 10+ years. Maybe more.

You have two options:

1. Stay the course knowing the fees will only increase as your portfolio increases.
2. Plan to move to Vanguard (or similar). Then work the plan.

Vanguard can do almost all of the leg work. I did give my EJ advisor a heads up (through email), but never met with him. I just said thank you for the service and told him I am graduating to the next level of investing. He didn't like it, but that was my last interaction on the subject. (You are terminated. Get to the chopper!)

Your Advisory Solutions funds will be cashed out. You might pay a $95 fee. You will make that back in one month at Vanguard in a low cost, broad based index fund 3 fund style portfolio.

Good luck!

ai_3_us
Posts: 50
Joined: Mon Jan 09, 2017 7:53 pm

Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 4:46 pm

livesoft wrote: Note how the FA didn't help you with financial advice on reducing taxes. That's because it would cut into their income they get from you. If I was in your situation, I'm pretty sure I could figure ou how to not pay any income taxes. May I ask what were your taxes in 2015 anyways, Form 1040 Line 63?


Total taxes were $2573. If it can be reduced to 0 then we are talking about a total change of $7500/yr (with current portfolio value) after accounting for fees as well.

ai_3_us
Posts: 50
Joined: Mon Jan 09, 2017 7:53 pm

Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 5:19 pm

CAsage wrote:Could I get some clarification? I hear various discussions in this very long and fascinating thread that OP's EJ fees are (variously) 1%, or 2%, or ? Is it true that EJ charges 1% for overall supervision plus the underlying Expense Ratios, so the OP is clearly spending closer $10K per year than $5,000 in total fees.

I don't think this is right exactly. I have not dug through everything, but it appears that some fees have been waived. I do not see other subtractions on my statements. It is possible that these fees are hidden in the cost of reinvesting or something, Therefore the $5k/yr does represent my total fees.


CAsage wrote:I won't even go into the ghastly drain of reinvesting dividends into load fees - even though the OP paid the load already on his (way too many) funds, is it also not true that reinvesting into those accounts also requires a "load" on his reinvestment? Crawling through the last two years detailed statements might be educational.

I also have this question, once I am in a mutual fund is the load not required for reinvestment? Again it appears I have no additional fees and that the $5k/yr represents total fees.

ai_3_us
Posts: 50
Joined: Mon Jan 09, 2017 7:53 pm

Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 5:21 pm

Jack FFR1846 wrote:I look at fees. You're paying about $5,000 on your (about) $500k portfolio.

By comparison, I'm all in index funds with some iBonds included since they're part of my investments. On a $2MM portfolio, I pay less than $900 a year in fees.

If you believe that the EJ mother ship can conjur up hocus pocus and make you money on par with indexing and you can sleep at night, then stay with them. I have a problem spending money on non-value things so will stick with indexing.


If I may ask, what kind of returns are you getting over the last 5 years? I know that this is incredibly dependent on what the portfolio looks like and that past performance is not an indicator of future performance, but I am interested since people seem to avoid this factor here.

Morik
Posts: 688
Joined: Tue Nov 25, 2014 12:26 pm

Re: EJ not [costing me as much as] others?

Postby Morik » Tue Jan 10, 2017 5:36 pm

ai_3_us wrote:
CAsage wrote:Could I get some clarification? I hear various discussions in this very long and fascinating thread that OP's EJ fees are (variously) 1%, or 2%, or ? Is it true that EJ charges 1% for overall supervision plus the underlying Expense Ratios, so the OP is clearly spending closer $10K per year than $5,000 in total fees.

I don't think this is right exactly. I have not dug through everything, but it appears that some fees have been waived. I do not see other subtractions on my statements. It is possible that these fees are hidden in the cost of reinvesting or something, Therefore the $5k/yr does represent my total fees.


Note that you won't see the fees charged by the mutual funds, only the fees charged by your advisor.

The fees charged by a mutual fund are subtracted from the fund's NAV, so you would just see a lower price per share than you would if the fee was lower.

So your total fees are:
- The visible fees (direct advisor fees)
- Plus the mutual fund expenses
- Plus the cost of any tax inefficiency (if you want to count this as a 'fee')

ai_3_us
Posts: 50
Joined: Mon Jan 09, 2017 7:53 pm

Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 7:07 pm

Morik wrote:The fees charged by a mutual fund are subtracted from the fund's NAV, so you would just see a lower price per share than you would if the fee was lower.


Thank you for this info. I think this was the missing piece.

Jack FFR1846
Posts: 4293
Joined: Tue Dec 31, 2013 7:05 am

Re: EJ not [costing me as much as] others?

Postby Jack FFR1846 » Tue Jan 10, 2017 7:26 pm

ai_3_us wrote:
Jack FFR1846 wrote:I look at fees. You're paying about $5,000 on your (about) $500k portfolio.

By comparison, I'm all in index funds with some iBonds included since they're part of my investments. On a $2MM portfolio, I pay less than $900 a year in fees.

If you believe that the EJ mother ship can conjur up hocus pocus and make you money on par with indexing and you can sleep at night, then stay with them. I have a problem spending money on non-value things so will stick with indexing.


If I may ask, what kind of returns are you getting over the last 5 years? I know that this is incredibly dependent on what the portfolio looks like and that past performance is not an indicator of future performance, but I am interested since people seem to avoid this factor here.


Beats me. I didn't discover index investing until 3 years ago. However, I did do a lot of comparisons in funds to prove to myself that the indexes I was going to had similar past performance. For example, Fidelity total market vs Contrafund. I did this fund by fund and convinced myself that performance was not drastically different.

Looking just at my IRA, it tells me that my 5 year is 12.59% but I don't know how representative that is of anything since 2 years of this was before I went to index funds. I'm 50/50 stock/bond for asset allocation as I'm only a few years to retirement.
Bogle: Smart Beta is stupid

User avatar
CAsage
Posts: 339
Joined: Sun Mar 27, 2016 6:25 pm

Re: EJ not [costing me as much as] others?

Postby CAsage » Tue Jan 10, 2017 7:59 pm

Good points made above. So, the fees are the 1% EJ is charging (about $5,000 per year) plus the underlying expense ration of the mutual funds (about $4500 per year) plus any fees on new or reinvested assets going into load funds. You can probably find those only by really looking hard.... As in, you put in some money and 94% of it actually goes to work for you. Highway robbery, really. I think my original point stands - the OP is paying a lot more than $5000 per year, and needs to understand that going forward. You don't see usual Expense ratios on mutual funds because they take it out of the books on the inside. I would note that Admiral Index funds have expense ratios in the range of 0.05% annually. That would be $250 per year, roughly. I think Fidelity Spartan funds (another excellent choice) are about 0.1%, or $500 per year in this case.

TIAX
Posts: 565
Joined: Sat Jan 11, 2014 12:19 pm

Re: EJ not [costing me as much as] others?

Postby TIAX » Tue Jan 10, 2017 8:15 pm

Fox wrote:Going forward, because of the new account changes at EJ, our advisor will be charging a flat fee of 1.2% (the lowest possible he said he can charge) on the accounts.

Lowest possible huh? That reminds me of this clip from Fargo.

millennialfalcon
Posts: 71
Joined: Tue Nov 29, 2016 8:59 pm

Re: EJ not [costing me as much as] others?

Postby millennialfalcon » Tue Jan 10, 2017 8:32 pm

TIAX wrote:
Fox wrote:Going forward, because of the new account changes at EJ, our advisor will be charging a flat fee of 1.2% (the lowest possible he said he can charge) on the accounts.

Lowest possible huh? That reminds me of this clip from Fargo.


:greedy Nice clip! My EJ advisor told me 1.3% was their best offer. I also didn't have 500k in my account, so that may actually have been the best [for my account with a low balance].

User avatar
Pajamas
Posts: 907
Joined: Sun Jun 03, 2012 6:32 pm

Re: EJ not [costing me as much as] others?

Postby Pajamas » Tue Jan 10, 2017 8:39 pm

ai_3_us wrote:
Edit, adding funds + ER + loads:
2.9% Goldman Sachs Commodity Strategy A GSCAX, ER = 0.85, Load = 4.50
4.0% Baron Small Cap Retail BSCFX, ER = 1.32, Load = 0
3.0% ClearBridge Mid Cap A SBMAX, ER=1.2, Load=5.75
2.2% Hotchkis & Wiley Mid-Cap Value I HWMIX, ER=1.02, Load=0
2.1% JHancock Disciplined Value Mid Cap A JVMAX, ER=1.12, Load=5
4.4% Victory Integrity Small-Cap Value A VSCVX, ER=1.5, Load=5.75
3.9% Delaware Select Growth A DVEAX, ER=1.25, Load=5.75
6.5% Dodge & Cox Stock DODGX, ER=0.52, Load=0
4.8% Harbor Capital Appreciation Instl HACAX, ER=0.64, Load=0
8.7% Invesco Growth and Income A ACGIX, ER=0.83, Load=5.5
7.8% JHancock Classic Value A PZFVX , ER=1.18, Load=5
2.8% Morgan Stanley Inst Global Real Est I MRLAX, ER=1.05, Load=0
12.0% Oppenheimer Main Street A MSIGX, ER=0.93, Load=5.75
6.7% American Funds Intl Gr and Inc F2 IGFFX, ER=0.7, Load=0
5.2% DFA Emerging Markets Value I DFEVX, ER=0.56, Load=0
4.7$ Harbor International Institutional HAINX, ER=0.77, Load=0
4.7% MainStay ICAP International I ICEUX, ER=0.95, Load=0
6.5% Oppenheimer International Growth A OIGAX, ER=1.14, Load=5.75
5.7% T. Rowe Price International Stock PRITX, ER=0.84, Load=0


Woah! That looks more like a portfolio of individual stocks rather than a portfolio of mutual funds. I can't imagine any good reason to be invested in that number of funds.

The 4.0 to 5.57% front-end load on many of those should be criminal. It even looks like your "adviser" put a fraction of a percentage under half of your investment in the funds with front-end loads. Those front-end loads are commissions that your "adviser" pockets. It has been shown time and time again that funds with loads do not perform better than funds without loads and there is no benefit to the investor. The expense ratios are high, too.

Just based on the number of funds in your account, the high expense ratios and outrageous front-end loads, you should run away from there. I even wonder if you have 19 instead of 20 funds and 49.8% of your investment in funds with pre-loads rather than 50% to avoid triggering some rule to protect account holders from outrageous behavior by the "adviser".

livesoft
Posts: 52557
Joined: Thu Mar 01, 2007 8:00 pm

Re: EJ not [costing me as much as] others?

Postby livesoft » Tue Jan 10, 2017 8:43 pm

^I like the 5 funds with "international" in the names, plus the emerging markets fund. Clearly, they have no clue when it comes to selecting the "best" fund for an asset class, so they just try to select them all.
This signature message sponsored by sscritic: Learn to fish.

ai_3_us
Posts: 50
Joined: Mon Jan 09, 2017 7:53 pm

Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 9:14 pm

livesoft wrote:^I like the 5 funds with "international" in the names, plus the emerging markets fund. Clearly, they have no clue when it comes to selecting the "best" fund for an asset class, so they just try to select them all.


Livesoft, isn't it possible that the international funds and emerging markets are disjoint. For instance, the international funds may be Europe based? Also, I added my taxes above ^, I am curious about your response :confused

ai_3_us
Posts: 50
Joined: Mon Jan 09, 2017 7:53 pm

Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 9:23 pm

Pajamas wrote: I even wonder if you have 19 instead of 20 funds and 49.8% of your investment in funds with pre-loads rather than 50% to avoid triggering some rule to protect account holders from outrageous behavior by the "adviser".


Interesting thought, but I wonder if it's coincidence. For instance on this thread https://www.bogleheads.org/forum/viewtopic.php?t=155404 the total funds with front load is > 70%. Also these funds may not have represented 49.8% of my investments when I initially invested >5 years ago? I don't know.

livesoft
Posts: 52557
Joined: Thu Mar 01, 2007 8:00 pm

Re: EJ not [costing me as much as] others?

Postby livesoft » Tue Jan 10, 2017 9:30 pm

ai_3_us wrote:
livesoft wrote:^I like the 5 funds with "international" in the names, plus the emerging markets fund. Clearly, they have no clue when it comes to selecting the "best" fund for an asset class, so they just try to select them all.


Livesoft, isn't it possible that the international funds and emerging markets are disjoint. For instance, the international funds may be Europe based? Also, I added my taxes above ^, I am curious about your response :confused

It is very unlikely that the int'l funds are disjoint, but you can check that with tools at morningstar.com.

As for your taxes: Yes, you paid taxes when you probably could have avoided them. If your earned income was higher, then you would've had a lot more taxes. When your earned income, dividends, and cap gains distributions pushes you above the 15% marginal income tax bracket, then this portfolio would cost you even more in taxes, so best to get out of it now.
This signature message sponsored by sscritic: Learn to fish.

Novine
Posts: 1145
Joined: Mon Nov 17, 2008 9:07 pm

Re: EJ not [costing me as much as] others?

Postby Novine » Tue Jan 10, 2017 9:32 pm

"Livesoft, isn't it possible that the international funds and emerging markets are disjoint. For instance, the international funds may be Europe based?"

You could ask your advisor. They should be able to explain why it requires 19 funds to accomplish what most people can accomplish with 3.

livesoft
Posts: 52557
Joined: Thu Mar 01, 2007 8:00 pm

Re: EJ not [costing me as much as] others?

Postby livesoft » Tue Jan 10, 2017 9:37 pm

I think the conclusion is inescapable that these E-J folks are a sorry excuse for a financial advisory firm.
This signature message sponsored by sscritic: Learn to fish.

Nate79
Posts: 375
Joined: Thu Aug 11, 2016 6:24 pm
Location: Portland, OR

Re: EJ not [costing me as much as] others?

Postby Nate79 » Tue Jan 10, 2017 9:41 pm

I got curious and put about 6 of your funds into M* and tried to compare to the best comparable index fund at Vanguard. The 6 I ran were most the load funds. Excluding the load they most trailed the comparable index, a couple of them pretty much matched the index fund. If you include the load I think all 6 would have trailed the index fund and if you consider the advisor fee on top of this it wouldn't have even been close. I was mostly using as much history as M* had, not your particular time period.

I didn't have time to look at all 19 funds as I was just curious.

fish idaho
Posts: 4
Joined: Sun Jun 26, 2016 11:23 pm

Re: EJ not [costing me as much as] others?

Postby fish idaho » Tue Jan 10, 2017 9:45 pm

It sounds like the OP is happy with his current funds and believes they will outperform a 3 fund portfolio. The OP also stated that his FA is not doing much.

He has never once suggested a new fund to me and has only called me up in a return to my calls, to schedule a check-in meeting, or for pertinent information (for example regarding the new IRA rules -- and even in this case he suggested I just stay the course and not change anything up).


Why not move the funds to Vanguard or Fidelity or someone who will take the transfer in-kind, and dump EJ. This would result in the same portfolio, with the same return, and save the OP the 1% being charged by EJ. Even if the OP is never convinced that passive investing is the way to go, at least they have achieved a 50% savings on their investment costs.

Bertie
Posts: 11
Joined: Tue Feb 10, 2015 11:45 pm

Re: EJ not [costing me as much as] others?

Postby Bertie » Tue Jan 10, 2017 10:01 pm

What asset allocation do you want, and does this portfolio provide that? It doesn’t look like you have any bonds (although I don’t know all of those funds, so maybe some include them). Is this what you want?

Assuming you want a 100% stock portfolio (and assuming you indeed don’t have any bonds in your portfolio), it looks like you have roughly a 64% US to 36% international split (I say roughly because your fund percentages in your original post add up to a bit less than 100%). If I read your original post correctly, over the past 5 years you've had an annualized return of 8.5%. Over the past 5 years Vanguard’s Total Stock Market Fund (Admiral) had an annualized return of 14.62%. Vanguard’s Total International Stock Fund (Admiral) had an annualized return of 5.5%. If you had a 64/36 split between those two funds, the annualized return would have been north of 11%.

Now this is probably an apples and oranges comparison because I suspect you do have some bonds buried in some of those funds, and my example doesn’t include any bonds (which would lower the 5-year return). But do you actually know what you own? Is the complexity of your portfolio really serving your needs? From the information you’ve given us, it seems like it’s hurting you, not helping you.

User avatar
Pajamas
Posts: 907
Joined: Sun Jun 03, 2012 6:32 pm

Re: EJ not [costing me as much as] others?

Postby Pajamas » Tue Jan 10, 2017 10:04 pm

ai_3_us wrote:
Interesting thought, but I wonder if it's coincidence. For instance on this thread https://www.bogleheads.org/forum/viewtopic.php?t=155404 the total funds with front load is > 70%. Also these funds may not have represented 49.8% of my investments when I initially invested >5 years ago? I don't know.



Yes, it is coincidence and the percentage has certainly changed but the thought crossed my mind! I have heard of some outrageous abuses by financial advisors and your situation, as bad as it is, admittedly is not one of them.

ai_3_us
Posts: 50
Joined: Mon Jan 09, 2017 7:53 pm

Re: EJ not [costing me as much as] others?

Postby ai_3_us » Tue Jan 10, 2017 10:10 pm

Pajamas wrote:
ai_3_us wrote:
Interesting thought, but I wonder if it's coincidence. For instance on this thread https://www.bogleheads.org/forum/viewtopic.php?t=155404 the total funds with front load is > 70%. Also these funds may not have represented 49.8% of my investments when I initially invested >5 years ago? I don't know.



Yes, it is coincidence and the percentage has certainly changed but the thought crossed my mind! I have heard of some outrageous abuses by financial advisors and your situation, as bad as it is, admittedly is not one of them.


I also realized that for some funds I gave the wrong ticker and hence the loads aren't quite right (similar fund names, different class) and in fact are lower than advertised originally. But I agree, I wouldn't be that surprised if something malicious along those lines was practiced.


Return to “Investing - Help with Personal Investments”

Who is online

Users browsing this forum: Bing [Bot], bironology, BogleMelon, cherijoh, frisbee, grabiner, Incendiary, laserquest, Loandapper, oldhobo, packet, Sbashore, student, Vision6800, Yahoo [Bot] and 83 guests